“Obama v. the Democrats–the $3 Trillion Obama-Boehner Deal’

Today, July 22, the press is reporting an pending deal between Obama and Boehner to cut $3 trillion in spending programs only in exchange for raising the debt ceiling and averting default. If Boehner takes it to a House vote, this will represent the total capitulation of Obama to the Teapublicans’ long standing position of spending cuts only (mostly Medicare, Social Security, Education, etc.) with no accompanying tax increases. It appears Obama is about to do this. If he does, it will mean disaster for Democrats in Congress. Should the Teapublicans accept the ‘cuts only’ deal, then the Democrats in Congress will be placed in the untenable position of approving the cuts and ending forever their avowed opposition to cutting social security and medicare; or, they oppose the $3 trillion cuts and they then assume the blame for a debt ceiling default and take this charge from the Teapublicans onto themselves. For Congressional Democrats it’s a ‘lose-lose’ proposition, and they have their President to thank for it. Meanwhile, Obama gets more corporate campaign contributions and appeals to the independent-moderate Republican vote.

‘OBAMA vs. the DEMOCRATS’ by Jack Rasmus, July 22, 2011

Today, Friday July 22, Obama and House majority leader, Boehner, are reportedly about to agree to a $3 trillion spending cuts only deal. Their original agreement earlier this month, which blew up due to Teapublican radicals opposition, called for a $4 trillion combined package of $3 trillion in cuts with $1 trillion from tax loophole closing to raise revenues. Now Obama is about to drop raising tax revenues altogether to get an agreement with Boehner and the Teapublicans to raise the debt ceiling.

Last spring he caved in and gave the House radicals and Boehner $38 of the $39 billion in spending cuts in the 2011 budget they were demanding from a reopening of last years budget. Now it looks like Obama is about to give them exactly what they want yet again! Only now its 100 times as large.

This $3 trillion spending only proposal will likely be agreed to by the House radicals if Boehner takes it back for a vote. After all, it conforms to their central principle all along. Teapublicans and the House have consistently demanded spending only cuts and no tax revenues. Tax revenue discussions will be addressed after the $3 trillion in spending cuts and debt ceiling is raised, according to business press reports. That will require a major revision of the tax code to follow later this year.

But only the naïve can believe that when the tax code revisions are addressed that the House radicals wont demand even further spending cuts. Already some of the most extreme right-wingers in the House, and Senate, among their ranks have introduced proposals to cut spending by $5 and even $9 trillion.

Future tax code revisions will begin with the Gang of Six program that was raised earlier this week. The Gangs deal, by the way, is essentially the Simpson-Bowles Deficit Commissions recommendations on tax code revision published last November 2010. What are these Commission-Gang of Six tax proposals? They arent simply closing tax loopholes. The Simpson-Bowles, now Gang of Six, tax program calls for additional massive tax cuts for the rich and corporations.

For example, the Gangs plan reduces the top marginal personal income tax rate from its current 35% to 23%-29%. Thats hundreds of billions in more tax cuts for the rich, in addition to the roughly $500 billion in continuing tax cuts for the rich and corporations passed less than a year ago as a result of Obama’s two year extension of the Bush tax cuts last December 2010.

But that’s not all. The Gang of Six plan also calls for a similar cut in the corporate tax rate, from 35% to 23%-29%. That adds still more hundreds of billions added to the deficit. Then theres their proposed abolition of the Alternative Minimum Tax that requires those earning more than approximately $150,000 a year to pay some amount of tax despite credits, exemptions, and loopholes. That’s potentially worth another $1.7 trillion. These three measures alone account conservatively for another $2.5 trillion in tax cuts for the wealthiest over the next decade.

How does the Gang of Six plan propose to pay for these additional $2.5 trillion tax cuts for the rich and their corporations? By mostly cutting Medicare, Medicaid and Social Security, plus across the board cuts in virtually all government departments. How much does the Gangs plan call for in defense spending cuts? Only $8 billion a year.

And remember, that’s spending cuts in addition to the proposed $3 trillion in spending cuts that Obama and Boehner today are reportedly about to agree to.

So, after Obama agrees to cut $3 trillion in spending only and kicks the tax revenue can down the road, bargaining begins again on how to cut spending even more to pay for another $2.5 trillion in tax cuts.

By dropping all demands to raise tax revenues now and by agreeing with Boehner to cut $3 trillion in spending immediately, Obama is essentially adopting the Teaparty proposals. But he is also painting himself and the Democratic Party into an impossible corner.

By proposing $3 trillion in spending cuts only, should the House radicals agree to the deal, Obama maneuvers his own Democrats in Congress into a lose-lose position. They either agree immediately to massive $trillion dollar spending cuts (including Medicare, Medicaid, education, etc.), or they oppose the cuts and consequently take the blame for holding up the debt ceiling increase. Instead of Republicans getting blamed for debt ceiling default, now the Democrats will appear to be the cause of holding up a deal and for a possible default.

Obama’s latest move strategically means he has put his own party in a box. Democrats in Congress will take the heat and suffer the losses in the next election if they agree to massive spending cuts that include Medicare and other programs. Democrats will also no longer appear as the defenders of social security and medicare against mercenary Republicans bent on destroying those programs. But Obama by this move gets to appear as the big spending cutter. That will no doubt translate into more corporate campaign contributions. It is a move designed to appeal to the independents and moderate Republican vote in the next election, at the expense of his own base. Obama and his advisers are no doubt betting his own Democratic voter base will stick with him against some crazy right wing opponent in the presidential elections. But the Republicans will not prove so stupid to run a Bachmann type. And Obama’s base, which already last year showed serious signs of being demoralized by the Presidents constant concessions, and stayed home in last years midterm elections, will once again not come out to vote in 2012. They will stay home.

This is 1978-1980 redux and Obama should change his first name from Barack to Jimmy. Or perhaps to Jimmy Bill Obama. That gives him an acronym of JBO, which is jobs misspelled and backwards. But that’s another problem with his administration, as next months jobs data will continue to show.

Jack Rasmus
July 22, 2011

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Senator Obama, when he was running to represent the Democratic Party in its quest to win the 2008 Presidency, was very aggressive in his call for the elimination of the “so-called” Bush tax cuts for those with taxable incomes (T.I.’s) in excess of $250,000.

Subsequent to becoming President, Mr. Obama said that he would let the “so-called” Bush tax cuts for those with T.I.’s in excess of $250,000 expire at the end of 2010, according to the “sunset” provisions. The “popular” rationale was that it might damage the fragile economy if that portion of the Bush tax cuts were eliminated.

Prior to the 2010 national elections, Congress did not address the continuation of the “so-called” Bush tax cuts. It seems to me that it would have been great politics for the Democrats to pass an extension of the so-called Bush tax cuts for those with T.I.’s under $250,000 prior to the 2010 elections. That was not done. Why?

What was the reason that this was not done, given that this was the stated desire of the Democrats and President Obama? It would have been the correct action to take and great politics preceding the 2010 elections.

The most rational and logical answer is that there never was any intention to allow those “tax errors” to expire.

Please note that I have re-characterized “so-called Bush tax cuts” as “tax errors”.

Alan Greenspan, on January 25, 2001, testified before the Committee on the Budget, U.S. Senate, regarding the “outlook for the federal budget and implications for fiscal policy”.
His testimony reflected that his biggest concern was the disposition of federal receipts once the national debt was paid off due to the “burgeoning federal surpluses”, which had been projected. His full testimony can be read @ http://www.federalreserve.gov/boarddocs/testimony/2001/20010125/default.htm

Thus, it appears that Mr. Greenspan lobbed a softball to Mr. Bush for the major tax “cut” of 2001. It was passed in an effort to mitigate the potential damages, as outlined by Mr. Greenspan, due to the projected “burgeoning federal surpluses”.

How many of our Senators and Representatives suggested that much, if not most, of these “projected” excess collections could be used to fill the shortfalls in Social Security, Medicare, and Medicaid?

Further, with some of those funds, we might have thought about repairing our bridges and roads, rather than to include such expenditures in a “stimulus” program.

The Fourth Estate should be posing the question to all who voted for this legislation: “Had you known then what you know, now, would you have voted in favor of that legislation?”

NOTES:
1. Our Senators and Representatives have “constituents” and “clients”.
2. Could it be that President Obama is a pawn?
3. Could President Obama be an example of the Peter Principle?
4. Is Nancy Pelosi’s protesting of the extension of the Bush tax “errors” a façade, since she did not bring this up for a vote, prior to the 2010 elections?
5. There is, absolutely, no rationale for the Democrats not to take the appropriate action without any Republican votes.
6. Errors, problems, pain, etc., are facts of life, but once these are recognized, efforts
should be put forth to eliminate or mitigate.

CONCLUSION: Anyone who votes to extend the Bush tax errors regarding T.I.’s in excess of $250,000, whether temporarily or permanently, should be Impeached and ousted.

Dr. Rasmus on Twitter

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